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Posted on Wed, Dec 29, 2010 : 6:03 a.m.

Chicago-area developers revive plans to build new downtown hotel at 202 S. Division in Ann Arbor

By Paula Gardner

Chicago-area developers who failed to get city approval to build a downtown Ann Arbor hotel in 2008 are preparing a new proposal for their property at 202 S. Division.

First Hospitality Group plans to submit new site plans for “Ann Arbor Hotel” on Jan. 24, according to a public notice sent to property owners near the property, located at the southwest corner of East Washington.


A former used car lot at 202 S. Division, the half-acre lot on the southwest corner of Division and East Washington that again will be under consideration for a new hotel. files

The company also plans a citizen participation meeting from 7-8:30 p.m. Wednesday, Jan. 5, on the third floor of the Ann Arbor District Library.

The move comes as developers consider at least two other locations for new hotels downtown: One with existing proposals on city-owned property next to the Ann Arbor District Library on South Fifth Avenue; the other a concept for South Ashley Street near William.

First Hospitality representatives deferred comment to Ira Ury, who once again is leading the Ann Arbor project. He did not respond to phone messages.

The last proposal sought to build 120 rooms in a 9-story building. The main entrance was to be on South Division, with off-site parking offered in the Liberty Square Parking Structure.

City planners familiar with the latest incarnation of the project were unavailable this week.

Under new downtown zoning, the half-acre property could accommodate a 180-foot building, according to city zoning documents. How that will affect the hotel proposal is unclear, but insiders say it’s possible that more height could be added to the proposed facility.

First Hospitality’s plans to revive the Ann Arbor Hotel proposal had not reached some local industry experts.

Mary Kerr of the Ann Arbor Convention and Visitors Bureau said Tuesday that she hasn’t been contacted by the company. Her office markets Washtenaw County’s 4,000 hotel rooms.

“If a hotel were built, we’d fulfill our role in providing marketing and sales support to the hotel,” she said.


The rendering proposed with Ann Arbor Hotel in 2008. First Hospitality officials would not comment on how the new proposal may be changed from this one. files

Charles Skelton, an Ann Arbor-based national hotel expert, said that while investors are now looking at hotel properties nationwide, expecting an upturn in occupancy in 2011 and beyond, the pricing is remains suppressed.

As for local occupancy rates, 2010’s overall rate was about 60 percent - the same as 2009, Skelton said.

The average rate per room fell from $96 to $94, he said, across the entire market.

Ann Arbor developer Ed Shaffran said lenders are starting to make construction financing available again after the downturn.

“You’re seeing more and more third-party lenders coming into the Michigan markets, and Ann Arbor is tops on that list,” he said.

He added that learning more about the projected construction costs and room count could give him a better indication of the viability of the project.

The plan, Shaffran said, “obviously is based on numbers. I’d question whether that means $100, $150 or $200 per night.”

Ray Detter of the Downtown Area Citizens Advisory Council said he objected to the previous proposal due to building design concerns.

His major concerns as he looks toward seeing the new plans revolve around the building designs, since the zoning for height is no longer an issue. The appearance and its effect from street level need to be considered, he said, as does how the nearby residences are affected.

The location, he added, is about 2 blocks from both the existing Campus Inn and the “Library Lot,” where the city has been considering plans for a hotel-conference center.

Whether those competitive concerns affect the potential project remain to be seen, he said.

“We all want something that’s successful,” Detter said.

First Hospitality Group operates hotels in 7 Midwest states; brands include Hilton, Marriott, and Fairfield Inn. It pursues both acquisitions and development opportunities, including joint ventures, according to its website.

The company’s Michigan properties include the Hampton Inn North on Green Road in Ann Arbor, in addition to properties in Southfield and Grandville.

First Hospitality bought the 202 S. Division property in March 2008 from McKinley Inc., which won city approval to build Metro 202 apartments on the property in 2007. McKinley owns McKinley Towne Centre on the east side of Division from the proposed hotel, and it retained approval rights for any First Hospitality development on the site, according to earlier reports.

Paula Gardner is Business News Director of Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.



Sat, Jul 7, 2012 : 2:30 p.m.

Downtown/ It won't make it.

Lets Get Real

Wed, Jan 5, 2011 : 2:01 p.m.

Let's Get Real - The controlling, money grabbing UM heard about the "need" for a conference center - they opened up the new facilities at the athletic complex for meetings, conferences, and weddings. Built with UM Athletic Dept funds/donations, maintained and serviced by UM employees, no property tax to pay, they have moved in on the local conference market with a subsidized business model competing with profit making, job creating, tax paying, expense laden small businesses. That sounds fair. I wonder how long time businesses like the newly renovated Weber's, the currently renovating Sheraton, and Eagle Crest view the level of that playing field? Will the UM contribute any of the newfound revenue to fix the bridge in front of their facility that was partially destroyed by the significant construction traffic that traveled over it? Probably not. Were I the dreamers considering the Library Lot Hotel and Conference Center - I'd be thinking again. Were I the Hospitality Group considering the hotel improvement to the vacant car lot for rooms only, I'd be a bit more interested - since UM's new Athletic Dept facilities + existing conference and meeting space mostly lack lodging - but I'd still be wary of only 60% (and declining) occupancy. Although I'd love to see that vacant lot upgraded to something productive, and although I'm more interested in a project built with private money, I'm leary about the ability of TWO new hotels being supported in this economy in AA in MI. "Field of Dreams" is right on target - it was a FICTIONAL movie. Build it, and some will come, but at the expense of thinning occupancy at other lodging establishiments. Did Mary Kerr really say we have 4000 rooms in Washtenaw County? That is already a significant supply given the conferences and conventions we see here. I'm glad the CVB would work with this new hotel to fill their rooms too. How benevolent of them. What do they do now to fill local supply by creating a demand? Some locally owned lodging facilities, that have been ignored, had to undertake their own separate marketing campaign because of the CVB focus on the bigger, franchise establishments who take profits out of the community, but contribute more collected lodging tax to the CVB budget. Follow the money. They see more spaces to generate a bigger budget for them (like the 150% increase they received last year when they raised the tax from 2% to 5% requiring travelers to pay 11% total tax when they visit AA). I am always entertained the perspectives of others: I love the long-term idea of making the 202 S. Division project a suite hotel so it is easier to convert to low income or student housing when it fails. Good Point! There's forethought for you. Sort of like the failed downtown Ann Arbor Hotel - now a senior citizen living center. And, if UM buys it - for pennies on the dollar - when it fails, the University can take it off the tax rolls, like it has so many other buildings in AA (Wolverine Towers, Schlumberg, Pfizer, etc). On the other hand, I'm really disturbed by the observation about the hotels on Boardwalk being a ghetto. Pretty nice ghetto, I'd say. I actually think because there is so much competition in that area, it demands good upkeep. Has anyone thought of the economic contribution the S. State St/Boardwalk area makes in AA: jobs created, property taxes paid, lodging taxes paid, close proximity to shopping and restaurants? Maybe it's just me, but I've seen considerably worse, although it would be nice to see a safe way for visitors to cross over busy State Street. Developing business in Ann Arbor has been a challenge for the 30+ years I've lived here and the 15+ years I've run a business here (anyone remember the persevering Leopold Brothers who nearly went out of business before they opened because of the AA hurdles and ultimately moved to CO after the bigger obstacles afforded them by MI. Not to mention the latest debacle of the growing dog care facility) Regrettably, lately I've seen even more brutally discouraging signs. I hope some of the changes at the state level will spur relief, but I'm not sure I can wait that long for the city to become responsive, collaborative and vibrant and the state to rectify the damage that has been done to create a discouraging, regressive business climate.

Stuart Brown

Fri, Dec 31, 2010 : 12:12 p.m.

What I think is interesting about the developers here is that they are willing to place an existing property they own at risk by increasing capacity in the same city (this developer owns the Hampton Inn on Green Road.) With occupancy at 60% and nightly rates dropping, increasing capacity anywhere in this town does not seem wise. It will also be interesting to see how the city responds to this proposal. The pro-Library Lot folks have to be plotting and scheming as we talk to scuttle this project ASAP; any PUD's are DOA. I wonder if these developers even have a clue as to the local politics or are they crazy like a fox?


Thu, Dec 30, 2010 : 5:51 p.m.

@ David Cahill, I totally agree with your points. I think the main reason why we see so many large scale developments planned for downtown, is largely to blame on speculation and lack of local investment opportunities for the wealthiest residence. What I mean is that if a development goes belly up (as you state with greater certainty and I agree) the initial investors won't lose their shirts because they'll have already cashed out only the banks will hold the title. These investors could potentially include local Politicians who orchestrated the deals with developers. The point is, that every time we have a hiccup in the local economy, folks with cash need to make money and local real estate deals are easy to push through if it benefits a few of the decision makers? Wink wink.

elvis the pelvis

Wed, Dec 29, 2010 : 11:03 p.m.

Forget the hotel idea...make it into a urban dog park?

rusty shackelford

Wed, Dec 29, 2010 : 8:29 p.m.

I agree with David Cahill's initial comment. Even if a hotel is not the ideal use of that space, the current empty lot is contributing nothing or less than nothing to the local economy. A hotel would clearly bring in at least some jobs and some additional customers for local businesses.


Wed, Dec 29, 2010 : 5:29 p.m.

Could the would-be developers of this hotel use the library lot for parking via valet parking? Even if they paid the going rate for the parking and used some hourly valets, it would be cheaper than providing underground parking at their location. And, they ought to be able recover some of the costs by charging the hotel guests who use the parking service. Many hotels offer parking, but charge the hotel guests $12 a day or so for that privilege. That's the price you pay for needing a car in a downtown hotel. Planning on using a car, stay in a suburban hotel (Briarwood, Plymouth Rd, etc.). I'm afraid now that the Library Lot hotel project will be able to bring this project to its knees because it won't be able to provide parking.


Wed, Dec 29, 2010 : 4:08 p.m.

"Why do developers build projects that will go belly up?" It's hard and soft wired into the human mind. Developers are no different than others-many professionals over invest, or purchase the wrong investments, or buy near the top; much as politicians over promise pay to employees; or people fear the earth will soon overheat. It all is the result of the strong human tendency to extrapolate that current trends will continue unabated.


Wed, Dec 29, 2010 : 3:01 p.m.

Maybe someone could talk to the De Parry's about sparing the 7 turn-of-the-century homes on Fifth and building their pile of crap on top of the Library Parking lot?

David Cahill

Wed, Dec 29, 2010 : 2:57 p.m.

Nearly every large commercial development in AA in the past forty years has become insolvent at least once. So I expect this project will also. But at least it won't take the city government down with it. Why do developers build projects that will go belly up? Because they want vanity projects in AA. Paula, I found your recent column on the Library Lot conference center/hotel to be really helpful. Are you going to do a similar column on this proposal? I hope.


Wed, Dec 29, 2010 : 2:46 p.m.

johnnya2: I doubt that many Ann Arborites consider south Division as a blighted area. I agree with timjbd that speculative building encouraged by easy money participated in creating the present recession. Restaurants and retail shops are highly competitive and therefore risky businesses to start especially in areas saturated with similar businesses. The redeeming feature about these entities is that they are often small enough to be converted into other businesses which can then try to be more successful. A large building like a hotel can change the appearance of a neighborhood more drastically then a new restaurant or retail shop. Furthermore, a bankrupt hotel may become the responsibility of the municipality which must then pay for basic utilities and upkeep in order to prevent building deterioration which can lead to neighborhood blight. Ultimately, the abandoned hotel may require demolition which is expensive as the city learned from the $500,000 cost for leveling the old YMCA over two years ago.

Vivienne Armentrout

Wed, Dec 29, 2010 : 2:39 p.m.

About the parking: the ordinance was changed somewhat with the new A2D2 rules, though I haven't reviewed that. But downtown development did require the supply of adequate parking in the past. I would expect that if a new hotel proposed to use only public-supplied parking (and the new underground facility is costing a great deal for each space), it would indeed need a PUD or a waiver of some kind. McKinley currently has control over most spaces in Liberty Square and some of those were re-allocated to Google at city expense. One of the rationales for building the 5th street structure was that State Street, through its Maynard structure, was already over-stressed for parking sufficient to serve its customers. It is hard to imagine that a hotel on Division could just blithely assume adequate parking is available at Liberty Square unless there is a prior understanding with, for example, McKinley. And I can't imagine staying at a hotel where I had to walk for a block to park, suitcases and all. I reviewed some of these issues, especially as they relate to the proposed Library Lot hotel, in a recent blog post,


Wed, Dec 29, 2010 : 2:39 p.m.

Let them go ahead if they are dumb enough but no tax dollars for anything, not so much as a garbage can.


Wed, Dec 29, 2010 : 2:33 p.m.

"Mr. Detter, let's not forget, was a champion for the Giant German Water Fountain at the new Courts/Police Building so he is quite the expert in beautiful urban design issues." The Hurinal?

say it plain

Wed, Dec 29, 2010 : 1:35 p.m.

ah, @timjbd says it so well :-)!


Wed, Dec 29, 2010 : 1:28 p.m.

"How about we stop building offices because there is plenty of office space in other facilities. Never build any more homes because we all know there are homes that are in foreclosure. The people who live with this mentality are the reason for the recession." Getting near full occupancy before building NEW office space is smart. Getting empty houses filled before building any more same-as-that-box developments is also smart. Doing the opposite of this is what contributed to the collapse- building massive housing and office complexes on spec with free money from Wall Street guaranteed by the tax-payer. Doling out NINJA loans to anyone with a pulse and bundling/packaging and RE-bundling them as securities and pumping those hand over fist onto unsuspecting (or not) investors multiple times over. That's how bubble economies work. Let's try to avoid another one.

Top Cat

Wed, Dec 29, 2010 : 1:06 p.m.

This location looks like the right size and location for a car wash.


Wed, Dec 29, 2010 : 12:53 p.m.

Veracity's editorial comments, among others, are useful for helping frame the story more clearly. Spare reports like this rely on readers to fill in gaps. Key questions include how closely the developer's profit is tied to the subsequent financial success of the hotel. If not, if the developer can take wads of cash up front and run, leaving behind a "partner" holding the bag, then it seems best to try and discourage this from moving forward. Under questionable development terms, the only good reason I can see to encourage the project is that, upon its probable financial collapse (or that of Campus Inn, alternately), this hotel could provide a fine solution — at last — for the loss of low-income housing formerly located at the old "Y" building on Fifth Ave. Or, as stated above, "Make it a suites hotel, so that when it dies, it will be easier to convert to student housing." Further, does First Hospitality intend to use its presumably deep financial reserves, as a chain or joint venture, to drive Campus Inn out of business through a war of financial attrition? Would that be desirable for the downtown area? And yes, this certainly helps force the issue on whether or not the library lot evolves into a large, oddly-shaped convention center, with attendant hotel. As meetings requiring long distance travel slowly gravitate to the internet, and with a new chain hotel just a couple block away, any hotel attatched to the convention center would become a white elephant the day it opens.


Wed, Dec 29, 2010 : 12:38 p.m.

Have the zoning board watch this:


Wed, Dec 29, 2010 : 12:25 p.m.

So a PRIVATE company is trying to develop a blighted area of the city with PRIVATE investors money, and somehow the people are pissed at that too. Let's not develop anything. I mean I see restaurants empty all the time, so let's not let more restaurants be built. We should also stop all retail development, because we all know you can get all the crap sold in a retail store online anyway. How about we stop building offices because there is plenty of office space in other facilities. Never build any more homes because we all know there are homes that are in foreclosure. The people who live with this mentality are the reason for the recession. They are afraid to do anything. If PRIVATE interests are willing to risk THEIR money, and it meets zoning requirement, then let them build it. How they determine the viability is really NONE OF YOUR BUSINESS.

David Cahill

Wed, Dec 29, 2010 : 12:23 p.m.

This project is good news for those who don't want a City-subsidized, debt-ridden conference center on the Library Lot. Since there is only a limited demand (if any at all) for hotel space, if this project is built, it dooms the Library Lot project. This project apparently will not require any City Council permission to violate zoning rules (a Planned Unit Development), so it could proceed right away. The big advantage for the public is that the developers will bear the financial risk of failure, not the city government. This would be a welcome change from the "privatization of profit, socialization of risk" that has become so popular recently. I'll be the Valiant partners and others who have participated in the various versions of the Secret Plan for the Conference Center are not having a good day today! 8-)


Wed, Dec 29, 2010 : 12:19 p.m.

I am not as pessimistic about the chances for success of a well-managed hotel in that location. It is already very hard to get substantial blocks of rooms within walking distance to Central Campus, and not only during peak times but also for UM-sponsored conferences etc. In a sense, a hotel without a convention center makes more sense to me than the convention center idea, as there is plenty of space available on campus to host events, in particular during the summer, provided that UM opens up its gates more to outside groups. That could also even out hotel occupancy more during the year and benefit everyone.


Wed, Dec 29, 2010 : 12:14 p.m.

Put a few conference rooms in and that will be the end of the need for the Library Lot Hotel. Make it a suites hotel, so that when it dies, it will be easier to convert to student housing.


Wed, Dec 29, 2010 : 11:59 a.m.

XMO: The "if-you-build-it-they-will-come" is as fictional as the film that mentions the phrase, entitled "Field of Dreams." The 10% unemployment and stagnant economy that you recognize are powerful reasons to be skeptical about building another hotel. And, by the way, the First Hospitality Group is not offering to spend "their" money but will be financing the project with money from third party investors. Ira Ury and his colleagues at First Hospitality Group will likely not risk any of their own assets and, therefore, will not have (as is said) "any skin in the game." I admit admiring the craftiness of developers who convince city administrators to approve risky developments and then obtain financing from greed-blinded and hope-driven investors. The fact that developers receive their fees immediately upon obtaining financing and not from revenue generated by business operations represents risk-avoidance behavior. Hopefully, city council will demonstrate the same aversion for risk.

4 Fingers

Wed, Dec 29, 2010 : 11:47 a.m.

I would think a small boutique hotel would fair well at that spot similar to the bell tower.


Wed, Dec 29, 2010 : 11:47 a.m.

The library lot folks must be scared with this idea. It will be pretty hard to have two large hotels within blocks of each other. Not sure why this new hotel can't use the underground library lot for its parking. There is no way that lot will get filled otherwise.

Brian Bundesen

Wed, Dec 29, 2010 : 11:41 a.m.

I also fall into the head-scratching camp on this one. While I would love to see new development, this doesn't seem to make sense at this time. I would love to know what the developers are using to base their profitability projections on. I would use it in some of my marketing materials.

paul wiener

Wed, Dec 29, 2010 : 11:29 a.m.

Based on the rendering: why build another architectural monstrosity? It's not that different from the seedy abandoned car lot there now. If A2 needs a new downtown hotel, how about making it something special, something modern, memorable, attractive, colorful, eye-catching, boutique-y? Enough with the rectangles! Look at other small cities & college towns. A2 is becoming an architectural embarrassment.

say it plain

Wed, Dec 29, 2010 : 11:01 a.m.

I think @Veracity hits it spot-on when he/she refers to how developers will *always* be happy to propose and seek approval for projects, so long as they make their fees and monies "up front", off the financing. Mr. Shaffran's comments provide the other piece of the puzzle here--lenders are giving out money again, why not, they have access to near-zero-interest monies from everyone else to play with themselves. Thus, it could look totally insane, and happen nonetheless. Someone probably got the word that the joker city council/city administrators are floating RFPs for conference centers and hotels in Ann Arbor, and plus if you're a developer playing the Midwest map, Ann Arbor seems a much better place than others in MI, no? When the forces of silliness and greed align like that, we have to hope that there's *someone* minding the city's best interests, and it's hard to feel confident about that in this town lately, unfortunately.

Tom Joad

Wed, Dec 29, 2010 : 11:01 a.m.

Ann Arbor and Michigan have double digit unemployment resulting from the near world economic collapse caused by peak oil. In case you haven't noticed oil prices are rising again to over a $100 a barrel. Housing prices are plummeting. There is no viable industry creating new jobs for Michiganders and as a result the state has lost population. Building a hotel downtown only to be filled on Football Saturdays is another boondoggle project. It will grease a few palms in the short term but will have little demand.


Wed, Dec 29, 2010 : 10:55 a.m.

"Beam me up Scotty, there is no intelligent life forms here!" Wouldn't it be interesting if we learned that the same handful of city misleaders advocating a recycled old-YMCA building convention center have encouraged this new, seemingly ill advised project?


Wed, Dec 29, 2010 : 10:49 a.m.

"With present DDA and city budgets facing deficits, additional financial responsibilities will likely require a special millage or introduction of a city income tax. " Um, or lower city labor costs: wage and benefit cuts...


Wed, Dec 29, 2010 : 10:24 a.m.

My god, are you people from Ann Arbor for real? We have 10%plus unemployment rate, a stagnet economy, and now some company wants to come in and spend there money to build a hotel complex and you are mad at them! Beam me up Scotty, there is no intelligent life forms here!


Wed, Dec 29, 2010 : 9:54 a.m.

Hope this new hotel includes it's own underground parking for at least 50 cars. Will it have a curb cut-away for pick-ups and drop-offs?


Wed, Dec 29, 2010 : 9:44 a.m.

ADDENDUM: Parking may be an issue with the construction of a hotel at 202 S. Division. Is the First Hospitality Group going to demand that the city issue municipal bonds to build another subterranean parking facility as has been done next to the library or is proposed for Village Green City Apartments? Multilevel parking facilities do not pay for themselves through parking fees. Servicing municipal bonds used to construct the parking facilities will require revenues from hotel operations. If the hotels do not generate enough revenue to service the bonds then the city's budget (or DDA's budget) must provide the difference. With present DDA and city budgets facing deficits, additional financial responsibilities will likely require a special millage or introduction of a city income tax.


Wed, Dec 29, 2010 : 9:25 a.m.

Handy of them to rely on Liberty Square for parking, too bad it is already near capacity most weekdays. I wonder how much will Republic Parking raise their day-rates this time.

Peter Eckstein

Wed, Dec 29, 2010 : 9:24 a.m.

I assume that these eager developers are planning to build with money other than their own. I hope that those others learn the history of the building of large downtown hotels--two were built and both went bankrupt, so that the banks providing the money ended up losing most of their investments. Campus Inn came back because later owners could buy it at fire-sale prices, and Ann Arbor Inn became senior citizen housing. This was before all the massive hotel development in the Briarwood area. Let's wait and see how much money the developers want the city to put into the project--and how little of their own they are willing to put up.


Wed, Dec 29, 2010 : 9:21 a.m.

The same arguments against constructing a hotel over the library parking lot and on South Ashley apply to building another hotel at 202 S. Division. First, no feasibility studies show a demand for more hotel rooms in Ann Arbor. A steady sixty percent occupancy rate is not encouraging. Adding more hotel rooms will only depress occupancy rates further, endangering the financial viability of all hotels in the area. Secondly, the cost of construction will likely require room rentals to exceed the average rental rates at other hotels in the area. Higher room rates will attract fewer customers reducing the probability of profitable operation. The general consensus among economic experts is that this recession will resolve slowly and will be hampered by stubbornly high unemployment rates. Very likely this new paradigm will limit any rise in hotel occupancy. Furthermore, Ann Arbor will never attract national and international travelers away from major business centers and resorts like New York, Chicago, LA, San Diego, Orlando or Vail, Colorado. In fact, traveling to meetings is being replaced by more convenient and less expensive virtual (online) meetings. As long as developers obtain their generous fees "up front" and "off the top" of any financing for construction projects, speculative building will be proposed whether the ultimate operational success will be likely or not. In the present business climate, failures of ill-conceived developments have been common, leaving communities holding bankrupt properties with no financial or cultural benefits.


Wed, Dec 29, 2010 : 9:07 a.m.

I hope they know what they are getting into. I expect the extortion requests from the city council to start soon.


Wed, Dec 29, 2010 : 8:58 a.m.

Quote: "First Hospitality Group operates hotels in 7 Midwest states; brands include Hilton, Marriott, and Fairfield Inn. It pursues both acquisitions and development opportunities, including joint ventures, according to its website. The companys Michigan properties include the Hampton Inn North on Green Road in Ann Arbor, in addition to properties in Southfield and Grandville." They already have all those same human storage facilities out in the Briarwood hotel ghetto.